Canada’s small businesses saw the largest quarterly decline in sales growth since 2020 in the final quarter of 2025, according to the latest Xero Small Business Insights report.
“We’re now seeing the true cost of a fractured global economy show up at the SMB level.”
Louise Southall, Xero
The quarterly report aims to provide insight into Canada’s small business sector based on aggregated and anonymized data from 12,000 Canadian small businesses that use Xero’s accounting software. Xero collected the data from firms making less than $50 million CAD in annual sales; it assessed sales performance, the time it took businesses to be paid, and the length of late payments from
According to the report, from October to December of 2025, Canadian small business sales growth dropped 4.1 percent year-over-year. That dragged down average sales growth for the entire year to 1.4 percent year-over-over, which is the largest quarterly decline in sales since July to September 2020.
The report attributes the decline to small business owners and customers responding to “heightened uncertainty” and “heavily disrupted supply chains” amid frequent shifts in US trade policy. While the report doesn’t mention specific policies, Canadian businesses were on a rollercoaster ride of changing tariff rates and trade exceptions between the US and Canada throughout 2025.
Louise Southall, an economist at Xero, said in a statement that the small business sector started last year in a “solid position,” following interest rate cuts by the Bank of Canada, but slowed throughout the year, resulting in the decline in its final quarter.
“Heightened macroeconomic uncertainty, heavily disrupted supply chains, and shifting trade policy have significantly impacted the Canadian small business economy,” Southall said. “We’re now seeing the true cost of a fractured global economy show up at the SMB level.”
Small businesses are at least seeing fewer egregious late payments. The report found that late payments typically lasted 9.7 days in the fourth quarter of 2025, two days below average and the shortest late payment period since the second quarter of 2024.
The report says that, looking ahead, 2026 is “likely to be another year of adjustment,” as small businesses continue to deal with supply chain changes and as exporters seek out new markets.
Feature image courtesy courtesy Unsplash. Photo by Maranda Vandergriff